Employment Class Action Blog - Information and Commentary on Employment Class Action Cases Affecting Employers

Once again a court has been required to consider whether a federal statutory claim might limit the reach of the Federal Arbitration Act, 9 U.S.C. § 1 et. seq. (“FAA”), and prevent arbitration of an individual discrimination claim.  This twenty-two-page decision reflects the on-going struggle by plaintiffs to discover potential exceptions to the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion.

On April 18 a Massachusetts district court held that a plaintiff must arbitrate gender discrimination claims despite alleging that her employer engaged in a pattern-or-practice of sex discrimination violative of Title VII of the 1964 Civil Rights Act and state law.

In Karp v. CIGNA Healthcare Inc.pdf (Case No. 11-CV-10361, D. Mass, 04/18/2012), Judge F. Dennis Saylor, IV compelled arbitration of Bretta Karp’s individual sex discrimination claim despite her arguments that she never waived her rights to a class action or class arbitration proceeding and that individual arbitration would deny her statutory rights under Title VII to bring a pattern-or-practice claim.

The Dispute Resolution Procedure

Karp, a former Provider Contract Manager, began working for CIGNA in 1997 and in early 1998 signed a receipt acknowledging that she received the Company’s 1998 Employment Dispute Arbitration Policy requiring employees to arbitrate their disputes with the company instead of going to court.  The 1998 policy did not reference class actions or class arbitration.

In 2005, CIGNA revised its Employee Handbook to reflect changes in its policies and procedures and circulated an e-mail to advise employees. The e-mail provided a link to an electronic version of the Handbook and required employees to complete an electronic receipt.  Karp checked “yes” on the Handbook receipt, which acknowledged that she reviewed the 2005 Handbook and agreed that disputes would be resolved through CIGNA’s Employment Dispute Arbitration Program.  Neither the Handbook, CIGNA’s e-mails nor the electronic receipt mentioned class arbitration or a class action waiver.  However, as noted above, the Handbook referred to the company’s Employee Dispute Arbitration Policy, Rules and Procedures which clearly provided that no class-wide arbitrations were allowed and “no class or representative actions permitted.”  And, while the court expressed concerns that the Company policies and procedures could be enforced against Karp, there was “no doubt that [CIGNA] did not agree to permit class arbitration.”  Thus based on AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1840, 1750 (2011), the court held that CIGNA “could not be compelled to submit to class arbitration.”

Is Litigation an Option?

While the District Court found Karp could not arbitrate her class claims, “it did not necessarily follow that she may litigate those claims in a judicial forum.”  Indeed, it ultimately found she could not.  The Opinion found that “by agreeing to arbitrate her individual claims, [Karp] cannot serve as a class representative in a litigated class action.”  But, Karp had contended that if she was compelled to arbitrate her claims individually, she would not be able to vindicate her statutory right under Title VII to pursue pattern-or-practice claims.  Thus, according to Karp, the arbitration clause could not be enforced because it was not a viable alternative to litigation.  The Court disagreed after considering the history, potential viability and practical impact of those claims. 

According to the Court, the pattern-or-practice “claim” under Title VII was in reality “merely a method of proof.”  The District Court would not permit “a procedural device – a burden-shifting rule contained within a method of proof – to trump the arbitration agreement and the FAA.”

Based upon that analysis, the District Court granted CIGNA’s Motion to Compel arbitration and stayed Karp’s action pending arbitration.

The Bottom Line:  Another lower court enforces U.S. Supreme Court precedent supporting arbitration.  An individual cannot assert a pattern-or-practice discrimination claim to defeat arbitration.

A recent decision from the United States District Court for the Northern District of Illinois contains three important lessons for employment class action litigation. The first is that disability cases, such as those under the Americans with Disabilities Act, are particularly hard to prosecute as a class. The second is a reminder that the parties, even if the plaintiff is the EEOC, must still meet the requirements of Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The third is that the EEOC, despite the first two lessons, is still taking aggressive positions in class litigation even when those positions are legally and/or factually wrong.

The case of EEOC v. United Parcel Serv. Inc.pdf., Case No. 09-5291 (N.D. Ill., Sept. 28, 2011), began as two more or less garden-variety ADA charges against shipping giant UPS. UPS furnishes its employees with up to 12 months of unpaid medical leave, or roughly four times what it is required to provide under the Family and Medical Leave Act. The first charge related to an employee suffering from MS who requested, among other accommodations, leave in excess of 12 months for her medical condition. The second was an employee with emphysema who requested assignments to generally cooler, well-ventilated work areas, was placed on medical leave because the company determined that that accommodation could not be provided. Both employees were terminated after their 12 months of medical leave expired. Both charges fell within the EEOC's latest efforts to create an obligation under the ADA for employers to provide almost unlimited leave to disabled employees under the rubric of a "reasonable accommodation." We'll leave the discussion of that issue to others.

In the UPS case, however, the EEOC not only asserted the claims of these two employees, but also asserted vague class allegations. It sought to pursue claims that UPS discriminated generally against an undefined class of disabled employees. UPS moved to dismiss those claims, citing the Twombly standard.

The district court began its analysis by recognizing that disability claims are fundamentally unlike other discrimination claims. While there is no good reason to discriminate based on race, gender, or similar traits, and employer may very well have a legitimate reason to take a disability into account where the disability prevents an employee from performing the essential functions of his or her job. Thus, the pleading standards in a disability case extend to the nature of the disability itself. 

[As an aside:  This is, of course, one key reason why it is so difficult to create a class-wide disability claim, because the type, nature, and extent of disabilities vary so widely as to defeat the 23(a) elements of commonality and typicality, as well as the superiority and predominance elements of Rule 23(b)(3).]

The district court found that the complaint only provided a "formulaic" description of the proposed class members, such as statements that they were disabled and "could perform the essential duties of her or her job without a reasonable accommodation." These vague allegations, the court held, did not meet the Twombly standard. The court similarly rejected arguments by the Commission that it was relieved of the Twombly standards because it allegedly was acting in the public interest or that it, rather than the charging parties, was the plaintiff. Concluding that the EEOC had not met the requisite pleading standard, the court dismissed the class allegations. It did, however, grant the opportunity to correct the pleading deficiencies, if possible, and noted that the action would still proceed on behalf of the two representative claimants.

The Bottom Line: The EEOC and others are pursuing class claims based on vague allegations, but courts are holding them to the Twombly pleading standards.

We've commented before (April 20, 2011) on recent cases in which the EEOC was sanctioned for bringing and pursuing expensive, class-wide litigation without much evidence. While the case has not yet resulted in sanctions, a recent decision from the Southern District of New York reflects another instance in which the EEOC made bold accusations against a high-profile employer, but failed to back up those accusations with any real proof.

In EEOC v. Bloomberg L.P.pdf Case No. 07 Civ. 8383 (LAP) (S.D.N.Y. Aug. 16, 2011), the EEOC brought suit against financial services and media giant Bloomberg, contending that it had engaged in a pattern and practice of pregnancy discrimination in violation of Title VII. According to its own press release issued at the time of filing suit, "the EEOC asserts that Bloomberg engaged in a pattern or practice of demoting and reducing the pay of female employees after they announced their pregnancies and after they took maternity leave. Some women were replaced by more junior male employees, the EEOC says. The lawsuit also alleges that the same pregnant women and new mothers were excluded from management meetings and subjected to stereotyping about their abilities to do their jobs because of their family and caregiver responsibilities." Ultimately, discovery revealed that approximately 600 women of Bloomberg's 10,000 employees had taken leaves.

So far, sounds like a big case, but for one problem - despite the seriousness of the charges leveled by the EEOC, it had no evidence to support them. As the District Court noted in its opinion granting summary judgment, "J'accuse! is not enough in court. Evidence is required." After three years of litigation, Bloomberg moved for summary judgment as to the pattern and practice claim.

It is difficult to square the EEOC's own efforts to garner publicity for the case with the amazingly small amount of evidence. The court noted, for example, that statistical evidence is virtually required to mount a pattern and practice case. The EEOC not only failed to produce such evidence, but the largely undisputed evidence from the employer demonstrated that women taking maternity leaves continued to have thriving careers and to receive hefty pay raises. In fact, the employer was able to show that women taking maternity leaves received, on average, higher pay increases than those returning from other types of leave.

Even without the all but essential statistical evidence, the court was unimpressed by the anecdotal evidence the Commission raised, in part because it was not very accurately presented. For example, the EEOC described one unnamed class member as "a consistently strong performer" whose compensation "repeatedly remained flat" after she took two maternity leaves. That individual, however, had received only middling reviews and had received regular increases, the largest of which occurred on her return from her second leave. In other instances, the EEOC relied on hearsay or the mere representation of its counsel, neither of which was competent evidence. Other examples proved not to be true on closer examination, or to support the employer's arguments.

The court noted in several instances that Bloomberg unabashedly was a demanding employer, one that advised its employees that it expected them to put their work ahead of their work demands. It ultimately concluded that the law did not "mandate work-life balance" and that the EEOC did not establish any company-wide discriminatory practice that did violate the law. After 64 pages of careful and at times incredulous analysis, the court granted summary judgment as to the pattern and practice claim.

The Bottom Line: The EEOC will pursue high-profile claims even without the requisite evidence, but courts are dismissing them when the promised facts never materialize.

A recent case from the Eastern District of New York reflects that race discrimination class actions can be brought, and also reflects the type of claim which will likely still survive in the wake of last week's Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011). (See our June 20 post on the Dukes decision). It also reflects some of the special issues that will continue to arise when employees of differing interests are included in a single class.

In United States v. City of New York.pdf Case No. 07-CV-2067 (June 6, 2011), the United States Justice Department challenged a test and related procedures used by the New York City Fire Department on the grounds that they had a disparate impact on minority applicants. During the course of the case, a black firefighters group known as the Vulcan Society successfully intervened and sought class certification, claiming a pattern and practice of race discrimination under Title VII and seeking to represent applicants who had been hired, but whose hire had allegedly been delayed as a result of the testing procedure. No, the Vulcan Society had nothing to do with Mr. Spock, but was a clever reference to the Roman god of things related to fire. In 2009, the District Court, following the grant of certification on the issue of liability only, found that the testing procedures did discriminate.

In a 48-page opinion issued on June 6, 2011, the court granted the Vulcan Society's motion to certify with respect to the remedial phase of the case, but with conditions. Interestingly, the City of New York did not appear to oppose certification per se, but did focus on the fact that the proposed class included both applicants and those who were hired. The City apparently agreed that the class was proper under Rule 23(b)(2) in that the primary goal was equitable or injunctive relief. The Dukes decision would likely have little effect on the accuracy of these positions because the resolution of one issue, the validity of the test, would resolve the entire case.

Because the primary issues were not in dispute, most of the opinion concerns the creation and management of subclasses. In a nutshell, the court concluded that while certification was appropriate in the remedial phase, the case would have to be managed through separate subclasses of applicants who were hired and those who were not. Because the Vulcan Society did not represent the non-hired applicants, and because its members had an inherent conflict of interest with those who were never hired, it also found that it could not be an appropriate representative as to the entire class. Interestingly, the court expressed concern whether the United States would adequately make determinations as to the unsuccessful applicants and appointed a Special Master to review their claims. These rulings likely flow from the court's earlier decision that the tests were discriminatory and discriminated against the entire class, and the analysis might have been different under Dukes if the plaintiffs had claimed discrimination arising from issues that were less wide-spread.

The Bottom Line: Testing cases may yet live long and prosper as class actions in the wake of Dukes. Conflicts among the class may make subclasses or other special procedures appropriate.

As many of the postings in this blog reflect, there has been a veritable flood of class and collective actions asserting wage and hour violations.  But even apart from Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9^th Cir.), cert. granted, 131 S.Ct. 795 (2010), now pending before the United States Supreme Court, discrimination cases still are being brought and may, under the proper circumstances, be certified.

In Brown v. Nucor.pdf. Case No. 2:04-CV-22005-CWH (D.S.C. Feb. 17, 2011), the plaintiffs brought suit against the employer under Title VII and 42 U.S.C. Section 1981, asserting hostile environment race discrimination claims on a class-wide basis.  They supported their claims with anecdotal evidence regarding numerous racist comments and monkey noises being broadcast over the company’s radio system, as well as other discriminatory acts. They also presented statistical evidence regarding lost promotional opportunities.  Incidentally, the plaintiffs were represented by the Alabama firm of Wiggins, Childs, Quinn, and Pantazis, among others, a firm that has scored a number of notable victories in both the discrimination and wage and hour arenas.

The suit was originally filed in 2004.  In 2007, following numerous procedural turns, the district court denied class certification, but that determination was overturned by the Fourth Circuit in 2009.  See Brown v. Nucor Corp., 576 F.3d 149 (4^th Cir. 2009),  In a 2:1 opinion, that court found that the denial of certification was an abuse of discretion.  This was itself an unusual holding, but the Fourth Circuit’s decision focused entirely on Rule 23(a) did not state which of the required Rule 23(b) provisions would apply.  In fact, after the court amended its opinion, it did not even mention Rule 23(b) at all.. 

On remand, predictably, the focus of the argument was on the meaning of the Fourth Circuit’s ruling.  The plaintiffs argued that the Fourth Circuit, by omitting any Rule 23(b) discussion, essentially directed that the class be certified under Rule 23(b)(2), for equitable relief.  Plaintiffs tend to prefer Rule 23(b)(2) classes because of their relative ease of administration and the absence of any opt-out rights by class members.  The defendant argued that the court of appeals had left open the possibility of denying certification if the district court found that no provision of Rule 23(b) applied.

The district court disagreed with both parties, but still handed the plaintiffs a victory.  It found that while the Fourth Circuit had not prescribed a provision of Rule 23(b), its order was clear that some class should be certified.  It found, however, no basis to apply Rule 23(b)(2), however, because the plaintiffs’ claims for back pay and punitive damages caused monetary relief to predominate. It also refused to certify a “hybrid” 23(b)(2)/23(b)(3) class.  It noted that there was a three-way split among the circuits and that the issue was currently before the Supreme Court in Dukes.  As to the availability of a hybrid claim, it sided with the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5^th Cir. 1998), and held that none was available.  Finding that class issues predominated, it therefore certified the class under Rule 23(b)(3).

Nucor has promised another appeal.  If and when a district court ever reaches the merits, the parties will have to litigate claims that may be seven to ten years old, and will likely test the limits of the witnesses’ memories.

The Bottom Line:  Wage and hour claims may now comprise the lion’s share of class action litigation, but don’t discount the possibility of race or sex discrimination class actions, which can themselves be extremely dangerous for the employer.  Litigation of this type can and often does drag on for many years.

Litigation often begets more litigation. A recent decision of the United States Court of Appeals for the Sixth Circuit reflects that even 35 years after it thought it settled a lawsuit regarding the hiring and promotion of officers in its fire department, the City of Memphis, Tennessee is still embroiled in litigation involving some of the same issues and their fallout.

Litigation involving alleged race and sex discrimination by the Memphis fire department has had a prominent history. Judgment decrees regarding race and employment practices were entered in 1974 (regarding promotions) and in 1980 (regarding hiring and promotions). The same fire department was the subject of the U.S. Supreme Court's 1984 decision in Firefighters Local Union No. 1784 v. Stotts, 467 U.S. 561 (1984),  when the department, due to budget reasons, began laying off firefighters hired under the 1980 consent decree. Sometime afterwards, the department was embroiled in still more litigation, this time by white and Hispanic firefighters, when it threw out the results of a promotional test that arguably had a disparate impact on African Americans. See Oakley v. City of Memphis, Case No. 07-6274 (6th Cir. 2008), vacated and remanded following Ricci v. DeStefano, 129 U.S. 2658 (2009).

Most recently, in Aldridge v. City of Memphis, the department was the subject of litigation by 26 former captains who were affected by a combination of the 1974 consent decree and a city charter provision granting "captain" status for any firefighter with 30 or more years of service. While technically not a class action, this decision highlights the ongoing problems with injunctive relief in large employment actions, and the impact even decades later.

Back in 1927, nearly 50 years before the litigation started, the City of Memphis amended its charter to grant "captain" status to firefighters after 30 years of service. The rule apparently rested upon the assumption that firefighters would slowly climb the promotional ladder and "achieve" that status at that time. In reality, however, many firefighters, despite good service in their positions, had not served as officers or in more senior positions, and, as a result, continued to serve in those roles even after their technical "promotions." The primary benefit of captain status became that of increased pay and retirement benefits. As the number of "captains" who achieved the rank through 30-year tenure increased, the city created a dichotomy between "merit" captains, which were now termed "majors," and "tenure" captains, who continued to be called "captains." The growing number of unnecessary, yet higher-paid, captains began to create both friction and budget problems in the department. In 2005, the department essentially abolished the position of "tenure captains." The date is significant because it was only one year after women and minorities began achieving the 30 years of service under the 1974 decree. Those holding the position were given various options, such as retiring or returning to their former rank.

A diverse group of affected tenure captains, including 16 white males, 7 black males, 2 black females, and 1 white female, filed suit, asserting a variety of claims. The claims included those for violation of the city charter, implied contract, and race and sex discrimination. Much of their case rested upon alleged statements by the department director expressing contempt for "tenure captains" generally. The district court granted summary judgment for the defendants, and the Sixth Circuit affirmed. The court concluded that nothing obligated the city to continue tenure captain status and, while the director's remarks were harshly critical of the tenure captain status, nothing equated that criticism with race, sex, or age. Because the city had based its decision on economic factors, the elimination of the position was lawful.

The Bottom Line: Some cases never die. Expect more class litigation of all stripes as more cities find themselves unable to continue pay and benefits systems created decades ago.

In the weeks following April 26, 2010, en banc decision of a deeply divided Ninth Circuit in Dukes v Wal-Mart Stores.pdf, 603 F.3d 571 (9th Cir. 2010), plaintiffs have predictably argued that the opinion justifies the certification of classes of virtually any size, including those in the overtime/misclassification arena. The case, however, does not apply to such claims by its own terms.

The Dukes case involved a pattern and practice claim under Title VII of the 1964 Civil Rights Act (“Title VII”), 42 U.S.C. §§ 2000e et seq., for gender discrimination in pay and promotions. The plaintiffs’ claims were bolstered by statistical evidence allegedly showing that while two thirds of the hourly Wal-Mart associates were women, only one third of managers were female, and by similar evidence that pay disparities existed in some stores as well as expert and anecdotal evidence regarding discriminatory conduct. The plaintiffs also made a showing, the court found, that Wal-Mart had a uniform personnel and management structure throughout its stores (a factor frequently absent in overtime cases), extensive centralized corporate control over its stores (ditto), and gender disparities in every domestic region of the company. Id. at 600. Relying heavily on the “abuse of discretion” standard of review, a bare majority of the court upheld the district court’s decision to certify the class.

The Dukes decision, however, contains nothing suggesting that large overtime classes should be certified. First, of course, the Ninth Circuit was reviewing the certification decision under an abuse of discretion standard, and even under that lenient benchmark fully five of the eleven judges believed it to be erroneous. The opinion thus is far from a ringing endorsement of the decision to certify, and nothing in the majority or dissents suggests that certification would have survived a less lenient review.

Second, the claim at issue in Dukes bore no relationship to overtime claims. Indeed, the majority took care to emphasize that the plaintiffs’ claims were those for an alleged pattern and practice of gender discrimination under Title VII, claims that by definition required no individual inquiry. Id. at 619, n. 41. It chided the dissent for what it described as a “misguided” concern for individual inquiries in that context. Id.

There is, of course, no such thing as a “pattern and practice” claim under the Fair Labor Standards Act or under any state overtime law that we are aware of, and particularly in misclassification cases both state and federal courts have emphasized the need for an individual inquiry regarding the duties of the putative class members. Thus, the text of the Dukes opinion reflects that the case was decided under a statute under which the individualized inquiry mandated in the overtime context was irrelevant. Further, nothing in Dukes suggests any misgivings about its prior holdings in the Wells Fargo.pdf and Vinole.pdf cases, in which the court rejected the certification of overtime classes far smaller than the class alleged in Dukes.

The Bottom Line: The Dukes case does stand for the proposition that a district court in the Ninth Circuit may not abuse its discretion by certifying a large uniform class in a Title VII pattern and practice case in the face of strong statistical evidence of gender discrimination . However, it sheds no light on whether a court should certify an overtime class of individuals working in a range of functions across different facilities when, by law, an individualized inquiry is required.